Madam Speaker, I am pleased to speak to Bill C-274, which has to do with the transfer of family businesses, a subject I have been interested in for quite some time.
The first document I consulted was the December 2010 report by Suzanne Landry for Raymond Chabot Grant Thornton, a chartered professional accountants firm. Ms. Landry, who is now a professor at the École des hautes études commerciales de Montréal, identified a number of possible solutions in her report.
This bill targets one of the most complex parts of the Income Tax Act: the sections about transfers and the capital gains deduction, among others. We are talking about butterfly transactions. This has all kinds of implications.
Subsection 84.1, which this bill would amend, was included in the Act under tax avoidance to prevent fraudulent transactions involving the transfer of businesses among family members. Caution is vital here.
I wanted to bring in legislation on this when I was a member of another Parliament, the Quebec National Assembly. The finance minister and I had several meetings on the matter. I decided not to go forward because he told me that it would cost a lot of money and that this was the type of measure that needed to be passed by the Parliament of Canada in Ottawa.
Fast forward to November 2013 when I arrived in Parliament. I was still working on ways to rectify this injustice. That is why I introduced Bill C-691, but unfortunately, the session ended in June 2015 and we did not have the chance to debate it.
Let us talk about the impetus for this bill. Let us look at the statistics. We were told that 45% of jobs and 80% of new jobs in the private sector were created by small businesses. The Canadian Federation of Independent Business, the CFIB, said that 66% of small businesses would change owners over the coming decade and that a third of small and medium-sized business owners wanted to sell to family members. That is to say nothing of the youth unemployment rate.
Then there are the reasons why this bill is essential. I can also say that business succession is at the heart of this bill. Business succession represents an economic challenge because it requires a succession plan and choosing the successor. We must encourage the sale of businesses to family members because selling a business to a stranger could result in its relocation, benefiting the strangers.
The safeguards in this bill will ensure that the ones to benefit will be the middle-class families. Ensuring the sustainability of small businesses is also essential to the job market.
This bill has an end goal. The concept of transferring a business to a family member is simple, but the solution is complex. When a parent sells his or her business to a person who is not related by blood, marriage, or adoption, the parent can choose to not pay tax on the first $824,000 of taxable capital gains. However, if the business is sold to the son, the parent cannot use the capital gains deduction. This bill will address an unfair element of the law.
When I introduced Bill C-691, measures also had to be taken to prevent abuse.
First, I included a gradual cap so that, if a company's taxable capital was less than $15 million, the company would be eligible for the deduction. If the company made between $10 million and $15 million in taxable capital, then the deduction would be reduced because we do not want large companies to benefit from this type of deduction.
Second, after placing this cap on taxable capital, I introduced a measure that required that an affidavit of the transaction, issued by an independent assessor and indicating the fair market value of the business, be presented to meet the conditions of the transaction. The buyer also had to be over the age of 18. What is more, if the buyer had to resell the shares after less than two years, the initial transaction would be deemed to have never occurred.
When I introduced the bill, it received the support of my NDP colleague and the the Canadian Federation of Independent Business, which was very important. When I held a press conference about the bill, representatives from the Canadian Association of Family Enterprise or CAFE were there with me to show their support. The Canadian Federation of Agriculture, which is made up of all the main farming associations in the country, and the Regroupement des cabinets de courtage d’assurance du Québec also supported the bill. It is important to mention that, in recent years, the Quebec CPA Order has raised this issue every time it has participated in pre-budget consultations.
In conclusion, I am certain this bill is the solution. I am glad that both the NDP and the Bloc Québécois decided to reintroduce it. However, there are a number of things to consider when we vote on this bill, cost being one of them.
I consulted the people at the Library of Parliament, and they told me that, in 2012, transactions involving eligible shares of small and medium-sized businesses amounted to more than $5 billion. In their tax returns, people cannot specify which transactions occurred at arm's length, so the Library of Parliament's findings are based on estimates.
They told me that, in 2012, transactions totalling $5 billion were carried out by more than 20,000 people. Supposing one-third of the transactions occurred between related individuals, such as 6,000 parents selling their businesses, giving them favourable tax treatment would cost the public purse no less than $300 million.
The Liberal government stated that it absolutely wants to help the middle class. Bourassa, the riding I represent, is struggling economically. Every month there, 19,000 children collect more than $8 million in Canada child benefit payments. By comparison, the cost of this program is exorbitant because it would cost $300 million to help 6,000 people.
In conclusion, yes, it is not fair, but present circumstances dictate that we take all of the factors into account to make the right decision. That is what we will do on Wednesday when we vote on Bill C-274.